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In the National Aeronautics and Space Act of 1958, Congress granted the National Aeronautics and Space Administration (NASA) authority to enter into transactions other than contracts, leases, and cooperative agreements; this gave the agency greater flexibility in achieving its mission. NASA uses its other transaction authority through three kinds of instruments known as Space Act agreements. Specifically, NASA uses reimbursable agreements when costs associated with an undertaking are reimbursed by the agreement partner (in full or in part); the agency uses non-reimbursable agreements when each party bears the cost of participation in mutually beneficial activities. In 2006, NASA began to use a third kind of agreement--referred to as funded Space Act agreements--that have involved NASA providing significant funds to private industry partners to stimulate the development of large-scale commercial space transportation capabilities. Under a funded Space Act agreement, appropriated funds are transferred to a domestic partner, such as a private company or a university, to accomplish an agency mission. These agreements differ from Federal Acquisition Regulation (FAR) contracts in that they do not include requirements that generally apply to government contracts entered into under the authority of the FAR. For example, under these agreements, partners are not required to comply with government contract quality assurance requirements. NASA policy provides that this authority may only be used when agency objectives cannot be achieved through the use of a procurement contract, grant, or cooperative agreement. As of October 31, 2011, NASA has used funded Space Act agreements to provide industry partners with $833.1 million for completion of developmental milestones, with the aim of potentially procuring crew (i.e., transporting astronauts) and cargo transportation services to the space station. Partners can collectively earn another $248.3 million under these agreements through the first half of 2012. It is important that NASA have strong internal controls in place to ensure proper use and management of funded Space Act agreements because they (1) permit considerable latitude by agencies and companies in negotiating agreement terms and (2) may not include the same oversight requirements found in traditional FAR-governed contracts. NASA has established policies and guidance for implementing agreements under its other transaction authority, specifically NASA Policy Directive 1050.1I, Authority to Enter into Space Act Agreements and NASA Advisory Implementing Instruction 1050-1A, Space Act Agreements Guide. In this context, Congress asked us to evaluate the extent to which NASA's controls ensure the agency appropriately manages funded Space Act agreements and enters into funded Space Act agreements only when its objectives cannot be achieved through any other agreement instrument, such as a federal procurement contract. This letter is the third based on Congressional request to review NASA's use of Space Act agreements. The previous two letters dealt with NASA's use of reimbursable Space Act agreements. We have also testified recently on NASA's Commercial Orbital Transportation Services (COTS) program, which has been executed under funded Space Act agreements. COTS is focused on supporting and stimulating the development of a commercial market for space transportation, from which NASA could potentially acquire cargo transportation services (e.g., delivery of supplies to maintain the space station and equipment to conduct research).

In accordance with GAO's "Standards for Internal Control in the Federal Government," NASA policy and guidance provide internal controls for certain aspects of using and managing funded Space Act agreements, such as separation of duties and delegation of authority. For example, NASA separates duties associated with authorizing, managing, and reviewing funded Space Act agreements. According to GAO's "Standards for Internal Control in the Federal Government," risk assessment is also an important control for ensuring programmatic objectives can be met, and NASA policy and guidance provide for varying levels of risk assessment. NASA's Space Act agreement policy and guidance provide controls for risk assessment related to reasonableness of cost estimates and whether or not a Space Act agreement is the appropriate legal instrument, but do not require specific documentation related to these assessments, as GAO's Standards for Internal Control in the Federal Government call for. Other risks that are traditionally assessed when making programmatic decisions, including safety and technical risks, for example, are not addressed in NASA's Space Act agreement policy. According to NASA, once it becomes clear that the agency can appropriately use a funded Space Act agreement for a given initiative, it is not necessary to assess such additional risks because these are borne by the agreement partner. When appropriate use of a funded Space Act agreement is less definitive based on programmatic objectives, according to NASA additional risks such as safety and technical risks are addressed through use of the agency's strategic acquisition approach and related policies. It is not always clear, however, when and if the objectives of a program drive the need to follow NASA's strategic acquisition approach and assess additional programmatic risks. Finally, though federal standards for internal control highlight the importance of training to maintaining competence, NASA does not require or offer formal training for individuals responsible for managing funded Space Act agreements. For its Commercial Crew program, NASA did develop and document a process to guide program officials through procedures associated with its agreements. Although the documented process is a positive step for the Commercial Crew program, given the unique nature of funded Space Act agreements and the judgment that can be executed by agreement managers, training could help ensure that future agreements are executed appropriately. We are recommending that NASA incorporate additional internal controls relating to documentation and training in its policy and guidance for funded Space Act agreements, and that NASA clarify if, how, and to what extent agency officials should refer to NASA's broader acquisition and risk management policies when considering use of a funded Space Act agreement. Commenting on a draft of this report, NASA concurred with our recommendations.

Recommendations for Executive Action

Status: Open

Comments: NASA updated its acquisition policy directive (NPD 1000.5), which outlines its strategic acquisition planning process, in 2013. This document only obliquely refers to NASA's other transaction authority (of which funded Space Act agreements (SAAs) are a part), but does not specifically address funded SAAs, or how to document decisions to use them. According to NASA's General Counsel, NASA's specific directive on the use of Space Act agreements (NPD 1050.1I) was to be revised prior to expiring in December 2014, at which time this recommendation would be addressed. Instead, in October 2014 the policy was re-validated through 2019 with no changes that relate to this recommendation. Development of a NASA Partnership Council (a governance body that provides guidance and oversight of NASA's partnership activities, including funded SAAs) desk guide is expected to address the content of this recommendation. Development of this guide is currently delayed but is anticipated to be issued in the coming months. NASA plans to implement a more substantive revision of NPD 1050.1 after the issuance of the guide which will further address the recommendation. As of August 2016, the Partnership Guide was still in work, as was the update to NPD 1050.1.

Recommendation: To continue to ensure funded Space Act agreements are used and managed appropriately, the Administrator of NASA should direct the appropriate offices to update the agency's policies and guidance to incorporate controls for documenting, at a minimum, the agency's decision to use a funded Space Act agreement and its analysis supporting the determination that no other instrument is feasible, as well as the agency's assessment of the fairness and reasonableness of the costs it is contributing to an effort conducted using a funded Space Act agreement.

Agency Affected: National Aeronautics and Space Administration

Status: Open

Comments: According to NASA's General Counsel, NASA's specific directive on the use of Space Act agreements (NPD 1050.1I) was to be revised prior to expiring in December 2014, at which time the content of this recommendation would be addressed. Instead, in October 2014 the policy was re-validated through 2019 with no changes that relate to this recommendation. Development of a NASA Partnership Council (a governance body that provides guidance and oversight of NASA's partnership activities, including funded SAAs) desk guide is expected to address the content of this recommendation. Development of this guide is currently delayed but is anticipated to be issued in the coming months. NASA plans to implement a more substantive revision of NPD 1050.1 after the issuance of the guide which will further address the recommendation. As of August 2016, the Partnership Guide was still in work, as was the update to NPD 1050.1.

Recommendation: To continue to ensure funded Space Act agreements are used and managed appropriately, the Administrator of NASA should direct the appropriate offices to update the agency's policies and guidance to clarify if, how, and to what extent NASA officials are to refer to the agency's broader acquisition and risk management policies when contemplating use of a funded Space Act agreement.

Agency Affected: National Aeronautics and Space Administration

Status: Closed - Implemented

Comments: NASA has had only limited use of funded SAAs to date, each of which has been implemented through different structures, depending on the purpose and scope of the award (as defined in the competition announcement). Thus, there has been no "one-size-fit-all" training that would be applicable for all uses. However, in 2015 NASA's Human Exploration and Operations Mission Directorate (HEOMD) finalized a "Funded SAA Best Practices Guide" to support spaceflight development activities, and additional guidance relating to partnership activities (including funded SAAs) is being developed. The charter for NASA's Partnership Council, which provides guidance and oversight of NASA's partnership activities, was also updated in 2015. Use of these guidance/training tools has not yet been incorporated in relevant agency policy (NPD 1050.1I, Authority to Enter Into Space Act Agreements), which was revalidated with minimal changes in December 2014. However, a more substantive revision of the policy that will fully implement this recommendation is planned following development of a Partnership Council desk guide--currently delayed, but expected to be completed in coming months. As of August 2016, the Partnership Guide was still in work, as was the update to NPD 1050.1. Given NASA's progress to date in addressing use of funded Space Act agreements, particularly in HEOMD's best practices guide, we are closing this recommendation as implemented, but will continue to monitor that status of the NPD 1050.1 policy update.

Recommendation: To continue to ensure funded Space Act agreements are used and managed appropriately, the Administrator of NASA should direct the appropriate offices to update the agency's policies and guidance to ensure training is provided to officials involved in executing funded Space Act agreements, when appropriate.